CASE STUDIES FROM AFRICA

2. AIR TRANSPORT SERVICES: A CASE STUDY OF
ETHIOPIA
Authors: Wyanie A. Bright and Million Habte
Executive Summary
Services are an important component of Ethiopia’s economy, particularly in recent years.
According to the new series of the national income accounts of Ethiopia, the service sector
accounted for 45.3% of GDP in 2011/12. The services sector is mainly made up of wholesale and
retail trade; hotels and restaurants; transport and communications; financial intermediation;
real estate; renting and business activities; public administration and defence; education; health
and social work, and community, social, and personal services.
The World Bank estimates that 13% of Ethiopia’s employed population work in the services
sector, while agriculture accounts for 79% of total employment and industry for 7%. This trend
is expected to change as the services and industry sectors grow at a faster rate than agriculture.
The air transport services sector is captured in the transport and communications subsectors.
Economic data of these two subsectors capture virtually all of the sea and air transport services
as well as telecommunications services, respectively.
Air Transport Services in Ethiopia
Discussion of air transport services in Ethiopia is primarily about the Ethiopian Civil Aviation
Authority (ECAA), Ethiopian Airports Enterprise (EAE), and Ethiopian Air Lines (EAL). In fact,
few private service providers exist. ECAA is the regulator under the Ministry of Transport’s
oversight: it regulates safety, licenses air transport service providers, inspects and licenses
airports, licenses aviation personnel, and registers aircraft. EAE controls, manages, administers,
and maintains airports, while EAL is the operator, being fully owned by the government. It is
one of the most competitive airline service providers on the continent.
Ethiopia has signed more than 106 bilateral agreements with other countries regulating the
conditions under which foreign airlines operate within Ethiopia and under which EAL operates
abroad.
The investment regulation (Ethiopian Council of Ministers Regulation No. 270/2012) states that
only Ethiopian citizens may provide air transport service with capacity of not more than 50
seats, which used to be only 20. This provides EAL with a monopoly on flights having more
than such capacity, be it domestic or international.
The Growth and Transformation Plan (GTP) is a five-year (2010-2015) plan developed by the
Ethiopian government to improve the economy by achieving annual GDP growth of 11-15%
from 2010 to 2015. For air transport services, GTP has it that the major focus for the sector will
be on strengthening its competitiveness and expanding passenger as well as cargo services by
creating new international destinations. It has developed ambitious goals and targets in specific
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